PepsiCo Foodservice Insights Briefing

Update on Work & Dine

Jaime Friedman

Director,

FS Consumer Insights

February 12, 2021

Nina Guest

Sr. Manager,

FS Insights

Ashley Dodge

Manager,

FS Insights

PEPSICO FOODSERVICE INSIGHTS 2

A Changing Tide at a Critical Time

COVID-19 deaths and hospitalizations have fallen,

-20% and -25% respectivelyFoodservice Implications

➢ Over 46.3M Americans have received at least one dose of the vaccine,

representing 67% of the total doses distributed according to the CDC

➢ Biden administration finalizes deal for +200M doses

➢ The CDC has endorsed a recommendation of doubling up on masks,

suggesting two could shield wearers from up to 90% of virus particles

➢ The RESTAURANT Act of 2021 was introduced to Congress after

receiving bi-partisan Senate support, which would create a $120B

relief fund

➢ The House Education and Labor Committee advanced a piece of their

COVID-19 relief proposal that calls for a $15/hr minimum wage

➢ 85% of operators say they’d be forced to increase menu

prices

➢ 62% of operators said they would eliminate jobs

➢ C.D.C. listed foodservice workers as essential & eligible for vaccine

➢ Eligible in phase 1C, the NRA advocating to be moved to 1B

➢ Vaccine distribution ultimately up to state & localities to decide

Source: NYTimes Interactive Map; NBC – CDC Mask Recommendation ; Congressional Budget Office – The Budgetary Effects of the Raise the Wage Act of 2021;

Harri – 2021 Hospitality Wage Inflation and Disruption Report

PEPSICO FOODSERVICE INSIGHTS 3

WORK DINE PLAY TRAVEL

WHERE ARE WE NOW? WORK CHANNEL

SHOP

W O R K T R A V E LD I N E S H O PP L A Y

PEPSICO FOODSERVICE INSIGHTS 4

2020 SEGMENT GROWTH (Real) (% Change in Retail Sales Equivalent)

Source: Technomic Long-Term Forecast, Technomic Economic Impact Monitor YE

SEGMENT CAGR 2019-2025(Real) (% Change in Retail Sales Equivalent)

CURRENT STATUS MOVING FORWARD

Workplace & Schools will continue to feel COVID impacts into the future

C&U

-45%

HEALTHCARE

-9.5%

B&I

-50.7%

-0.6%

-1.8%

-4.2%

-1.5%

1.1%

Foodservice Noncommercial B&I C&U Healthcare

PEPSICO FOODSERVICE INSIGHTS 5Source: Technomic Economic Impact Navigator Year End 2020 Report, December 2020; Kantar US Monitor Oct 2020 (T2B); Pew Research Center ‘How the Coronavirus

Outbreak Has – and hasn’t – Changed the Way Americans Work’ October 2020; McKinsey; : NYT Is Remote Work Making Us Paranoid?; Fortune; NYT COVID Social Anxiety

More people than ever are still working from home, though most

expect to return within six months

Despite increase in productivity, WFH is taking a toll on consumers

46%

say WFH positively

affects their focus

and attention on

their work

I’m not sure how much longer I

can keep going like this.

75%

of employees in the

United States report

symptoms of burnout

Artifacts of a WFH Life:

Surfacing new vulnerabilities & bonds• Co-workers are being more vulnerable, sharing the

more personal parts of their lives – children, pets,

homes – with coworkers

• Virtual communication is leaving some feeling new

anxieties, exacerbated by job security concerns

Increased social anxiety• The ‘Groundhog Day’ effect of spending so much time

at home is leaving some consumers more stressed

about what they’ll talk about with people once in-

person again

Relocating & leaving cities• Nearly a quarter of consumers have moved since the

pandemic began, with permanent moves are mainly

driven by Millennials & Gen Z

• 48% of moves are away from urban areas

Greater attention on balance of responsibilities

at home• Nearly 4 in 10 (39%) working mothers report that it’s

harder now to balance work and family responsibilities

(vs just under 3 in 10 (28%) working fathers

PEPSICO FOODSERVICE INSIGHTS 6

Bringing people back

OUTLOOK

1 in 4 Americans will be

working remotely

in 2021

By 2025, 36.2 million

Americans will be working

remotely, an 87% increase from

pre-pandemic levels

Source Upwork Future of Workforce Pulse Report, January 2021; Kantar US Monitor Oct 2020 (T2B); Pew Research Center ‘How the Coronavirus Outbreak Has – and hasn’t –

Changed the Way Americans Work’ October 2020; Fast Company

Consumer desire for flexibility is here to stay… …and Operators are adapting

54% Would want to work from

home after COVID-19

WHAT THEY WANT TO CONTINUE POST COVID-19

✓ Continued flexibility to choose hours & location

✓ Opportunities for greater in-person connection with

their co-workers

✓ Ability to dress more casually for work

69% of CEOs are planning to

downsize their office space

86% moving forward, employees

will work between one and

four days at home

20-30% of office workers are

projected to WFH

permanently post

COVID-19Up from under 10% pre COVID-19

Estimated

PEPSICO FOODSERVICE INSIGHTS 7

The New Realities for B&I

Companies will need to revisit benefits & invest in at-home technology for employees

Source: The New Yorker; The Atlantic

Physical offices will be hubs for collaboration and

inspiration

Addition or expansion of designed eating, drinking and

physical activity centers to make time on-site more valuable

Decreases in open office plans, sufficient spacing between

people & desks, perhaps even fixed furniture

Food & snack areas also poised for change with individual

packaging at coffee and snack stations

Prioritization of spaces for team meetings & collaboration

Addition of greater team bonding & connection spaces

New layouts driven by safety

With a decreased need for fewer people in the office most of the time,

there’s greater emphasis on making the regular transition from in-person to

WFH more seamless.

provide wifi hotspots & internet solutions to ensure

connectivity required for videoconferencing & collaboration

Revisit benefits to include things like stipends for home office

setup (ergonomic chairs, monitors, etc.), increased

meditation/therapy options, meal deliveries, or even

unlimited PTO

Invest in new ways to keep employees engaged and feeling

connected to each other while remote

“More spaces for collaborating. Less individual desk space”

“Would love to see more team-oriented spaces like a table, screen, and

partial privacy that a team can use and have informal meetings instead of

everything requiring a conference room.”

PEPSICO FOODSERVICE INSIGHTS 8

Redefining Benefits

• Employers have begun sending

employees care packages to keep

teams and coworkers feeling connected

while at home

Employee Care Packages

PwC introduced new benefits to provide

increased flexibility. Examples include:• Ability to move to a part-time or 4-day week

• Sabbaticals: a six-month leave of absence at

20 percent of normal pay

• Protected hours: Set hours of the day without

meetings or assignments

• Back-up care & tutoring support: $2,000 in

child or elder care reimbursement, discounts

on tutoring, nanny placement and college

admissions support.

• Facebook Menlo Park plans to launch

an on-site hotel. The proposed hotel will

be five stories tall and will contain a

restaurant.

• American Airlines is building a $250

million hospitality center at its

headquarters, which will include retail

and hotel space, as well as dining areas

and a tavern.

Source: Technomic Ignite, NYT

Embracing Flexibility of WFH Hotels at HQ

PEPSICO FOODSERVICE INSIGHTS 9

28%

22%21%

15%14% 15%

10%11%

18%

8%

Vending machines withfood/snacks

Cafeteria with grab-and-go items only

Snacks (free foremployees)

Cafeteria with made-to-order items

Micromarkets (self-service markets with self-

checkout)

Source: Technomic Economic Impact Navigator Year End 2020 Report, December 2020

Grab & go solutions growing since COVID-19 on-premise, while WFH

driving AFH spend

Impact on B&I Foodservice

B&I FOODSERVICE AVAILABILITY

Work from home

$184.20Work away from home

$150.00Unemployed

$108.20

AVG WEEKLY AFH FOODSERVICE SPEND

Currently hasHad before COVID-19

PEPSICO FOODSERVICE INSIGHTS 10

How B&I Operators are adapting

• Sodexo recently announced its

acquisition of Nourish, Inc. and the

expansion of its Good Eating Company

platform to North America

• Nourish is a commissary kitchen offering

25 cuisine types and a focus on

seasonal, global, plant-forward dishes

• Powered by Sodexo’s mobile app, users

can place an order for pick-up at their

office or delivery to their home

• AVI Foodsystems, is partnering with

Fifth Third Bank on a daily free meal

program employees who work onsite in

the company’s support services complex

• Grab-and-go, custom-prepared choices,

snacks, and beverages are also

available at onsite cafés & micro

markets

Leaning Into Off-premise, On-premise

• Home-meal-delivery company Freshly,

recently piloted a program for

businesses to provide delivered meals to

employees working from home to

replace the workplace café

Source: Technomic Ignite, Freshly Image courtesy of Freshly

Expanding to delivery Meal Kit Partnerships

PEPSICO FOODSERVICE INSIGHTS 11

Primarily online

Primarily in person

Hybrid

Fully online

Fully in person

Undetermined

Other

The Spring semester remains mostly virtual as new COVID-19 variants emerge

40%

16%

9%

3%2%

25%

5%

C&U SPRING REOPENING PLANSas of 1/31/21

Out of nearly 3000 colleges, 3% are fully online, 2% are fully in person

More change for C&U this Spring:

Spring Break will likely be canceled

Similarly to how C&U adapted fall breaks

to reduce students traveling to and from

campus, some are considering canceling

spring break in favor of sprinkling in days

off throughout the semester

Source: The Chronicle of Higher Education, Retrieved January 31, 2021; US News & World Reports ‘What the

Coronavirus Means for the College Experience this Spring’

Financial Aid further in flux

With many families experiencing

continued financial impact as a result of

COVID-19, there may be opportunity for

increased financial aid

Athletic programs likely won’t go on as

planned

While some high-profile sports (i.e.,

College Basketball) might be able to go

on with COVID-19 protocols, smaller

programs will likely not play at all

Early signals of decreased applications

for Fall semester

In addition to application deadlines being

extended into the new year, initial

CommonApp data suggest fewer low-

income students submitting applications

PEPSICO FOODSERVICE INSIGHTS 12Source: Technomic Economic Impact Navigator Year End 2020 Report, December 2020; Datassential report 45: WAITING GAME

2.5.21; Foodservice Director; Jersey Mike’s first ghost kitchen is on a college campus

C&U operators prioritizing Grab & Go & slimmed down on-premise

80%

57%

31%

17%

9%

Grab-and-go/takeout (i.e., meals intended to be eaten athome, in dorms, etc.)

Indoor dining in cafeterias/dining halls at partial capacity

Outdoor dining options for meals ordered in thecafeteria/dining hall

Indoor dining in cafeterias/dining halls at full capacity

Delivery

WINTER 2021 C&U DINING EXPECTATIONS

Using a cafeteria-style

serving line (NOT self

service) TOO RISKY

41%

Getting carryout /

takeout from

restaurants

NOT RISKY

44%

Operators are building on Fall Semester

learnings for the Spring

In the fall, Bryn Mawr College had

created a unified menu for dining

halls to avoid crowds at one location

for a specific dish. This spring, they’re

introducing a wider variety of meals

and the ability for students to

digitally reserve meal times for any

meals (up to 6 days in advance).

Colorado State University is

switching back to a build-your-own

model (ability to choose sides &

amount of items) following a focus on

pre-packaged foods in the fall.

Photograph courtesy of Colorado

State University

Photograph courtesy of

Creighton University

Digital & Off Premise remain a space for

experimentation & growth

Indiana University

at Bloomington

leveraged Grubhub

as a way for

students to order

meals from campus

dining locations

Jersey Mike’s

opened it’s

first ghost

kitchen at

Rider College

PEPSICO FOODSERVICE INSIGHTS 13

While in-flux, K-12 remains mainly virtual

57%

17%

26%

HOW ARE YOUR CHILDREN CURRENTLY

ATTENDING SCHOOL?11/4-11/7/21

Entirely in person

Hybrid Virtual

Source: Technomic Economic Impact Navigator Year End 2020 Report, December 2020; Kantar US Monitor October 2020

39%

of parents say they’re

experiencing more stress in

regards to managing their

child’s education compared to

past years

Parents are feeling the stress of K-12

virtual learning:

1 in 3 of parents worry about the

effect COVID-19 will have

on their child’s education

Over

PEPSICO FOODSERVICE INSIGHTS 14

Parents are seeking help sourcing meals

$101.10

$47.40

Parents

Non-parents

20%

30%

13%

8%

29%

Every time

More than half the time, butnot every time

Half the time

Less than half the time

Never

34%

31%

29%

25%

20%

17%

16%

15%

13%

5%

My children prefer homemade lunch

I do not want to unnecessarily exposemyself or children to COVID-19

It is easier to make lunch myself

I do not want to take up resources when Ican make food myself

This option isn’t offered at my child(ren)’s school

I do not have time to pick up lunch

I was not aware of this type of program

The quality of the school lunch is too low

Cost is too high

I do not have a car

73% of parents with school-aged children are ordering third-party delivery monthly

Source: Technomic Economic Impact Navigator Year End 2020 Report, December 2020

DETERRENTS FROM PICKING UP SCHOOL LUNCHHOW OFTEN DO YOU PICK UP LUNCH FOR YOUR CHILDREN

AT SCHOOL WHEN THEY ARE LEARNING VIRTUALLY?

WEEKLY FOODSERVICE SPENDING AWAY FROM HOME

Nov. 4-7, 2020

PEPSICO FOODSERVICE INSIGHTS 15

This winter, K-12 foodservice is mainly driven by limited in-person or pick up

72%

50%

22%

15%

12%

Indoor dining in cafeterias/dining halls at partial capacity

Grab-and-go/takeout (i.e., meals intended to be eaten athome, in dorms, etc.)

Indoor dining in cafeterias/dining halls at full capacity

Outdoor dining options for meals ordered in thecafeteria/dining hall

Delivery

WINTER 2021 K-12 DINING EXPECTATIONS

Source: Technomic Economic Impact Navigator Year End 2020 Report, December 2020; Foodservice Director; Technomic Ignite Q4 2020

Broward County Public Schools

district continues to offer grab-and-

go meals for breakfast and lunch

every Tuesday and Thursday.

Students or parents can pick up

multiple meals at a time and those

not eligible for free or reduced

meals are able to pre-pay online.

At Northern Lehigh School District in

Saltington, Pa., staff members put

motivational sayings in grab-and-go

bags as a way to engage and

maintain connections with students

while at home.

PEPSICO FOODSERVICE INSIGHTS 16

Healthcare recovery nuanced, while new foodservice solutions gain traction

While elective procedures resuming has contributed to signals of recovery, there continues to be uncertainty around:

❑Timing of hospitals loosening restrictions on visitors

❑The long-term impact of telehealth

Source: Technomic Economic Impact Navigator Year End 2020 Report, December 2020; Foodservice Director

ADOPTION OF DIGITAL

Morrison Healthcare launched

InstaEat for mobile-ordering, slowly

expanding to include breakfast

and lunch for pick up. Expansions

into evening meals, 24 hr service

and delivery are in the worksPhotograph courtesy of UK

Healthcare

GRAB & GO HERE TO STAY

Grab & Go Meals and Markets at

OSU Wexler Medical Center have

received positive feedback from

staff, addressing a key need

for convenience

TAKE HOME MEALS

At Penn State Health in Hershey,

Pa., the Metz Culinary

Management team has developed

a take-home meal program to

serve various-sized families as an

additional revenue stream

PEPSICO FOODSERVICE INSIGHTS 17

IMPLICATIONS

1. WFH and flexible schedule are here to stay to some degree moving forward. Operators should continue to expand offerings to meet these needs, including using food & beverage to keep teams connected.

2. Parents are actively seeking meal solutions during this time. Operators should consider exploring meal solutions beyond just a singular employee, broadening to meal kits and bundles.

3. Operators are looking for ways to liven up streamlined menus. Suppliers can provide additional support through product innovations & greater variety to change up menus without added operational complexity.

PEPSICO FOODSERVICE INSIGHTS 18

WORK DINE PLAY TRAVEL

WHERE ARE WE NOW? DINE CHANNEL

SHOP

W O R K T R A V E LD I N E S H O PP L A Y

PEPSICO FOODSERVICE INSIGHTS 19

2020 SEGMENT GROWTH (Real) (% Change in Retail Sales Equivalent)

Source: Technomic Long-Term Forecast, Technomic Economic Impact Monitor YE

SEGMENT CAGR 2019-2025(Real) (% Change in Retail Sales Equivalent)

CURRENT STATUS MOVING FORWARD

Limited-Service Restaurants are expected to recover more quickly than Full Service

-0.6%-0.3%

1.1%

2.4%

-4.2%

-2.2%

-3.8%

Foodservice Restaurants Fast Food Fast Casual

Midscale Casual Dining Fine Dining

FAST CASUAL

-14.2%

MIDSCALE

-48.2%

FAST FOOD

-9.4%

CASUAL DINING

-34.6%

FINE DINING

-51.6%

PEPSICO FOODSERVICE INSIGHTS 20

While Total US restaurant sales in 2020 decreased significantly, consumers still have strong engagement with restaurants

28%

34%

23%

13%

25% 25%

13%

7%

30%

36%

19%

10%

35% 37%

21%

11%

Full Year 2019 Spring 2020 (A) Summer 2020 (B) Fall 2020 (C)

OCCASIONS THAT TOOK PLACE OR WERE SOURCED

FROM A RESTAURANTBY GENERATION

Gen Z18-22

Millennials23-41

Gen X42-55

Boomers56-73

-19.5% Estimated sales decline in 2020,

bringing restaurant sales down to

$517 billion from $642 billion in 2019

AA

AA

AA

Source: Mintel The Future of Foodservice:2021 Dec 2020; Hartman Group COVID-19’s Continued Impact on Eating Dec 2020

Usage is changing due to COVID impacts, restaurant sourced

occasions:

• Are less likely to take place alone, more group/family

• Are less spontaneous, with less than 1/3 being decided upon

less than an hour before eating

• Are fulfilling a broader range of need states, ranging from

convenience, fresh and less processed and positive nutrition, to

premium attributes such as local, seasonal and global flavors

• Are more reliant on delivery services, with availability of food

delivery services becoming a much more important attribute vs.

prior

Restaurant sourcing has increased since the

beginning of the pandemic among all generations

and remains most popular among Gen Z and

Millennials

PEPSICO FOODSERVICE INSIGHTS 21

Most Foodservice locations have stayed open through the pandemic

Source: Datassential COVID-19 Report 42 ‘Bracing for More’ 12/24/20; Datassential Firefly - Closures as of 1.29.21; Technomic Mergers, Acquisitions, and Bankruptcies Q1 2021 Update

Temporarily

Closed

Permanently

Closed

Total Closed

May 6 8.2% 3.3% 11.5%

July 13 3.1% 4.5% 7.6%

Sep 23 2.9% 5.0% 8.0%

Jan 29 2.6% 8.8% 11.4%

More than half of operators have stayed open entirely, while others claim varied closures. Unfortunately, there have been

some casualties as well, with over 8% of restaurants permanently closing in 2020 and 30+ chain bankruptcies.

Operators Report on their Status: Cumulative Restaurant Closures as Measured by Datassential:

30+ Notable Chain Restaurants are/were recently involved in

Bankruptcy filings, many citing COVID-19 impacts

TOTAL Restaurants On-Site

Closed completely at first, then re-

opened and have been open ever

since

24% 24% 23%

Stayed open at first, but have since

closed completely1% 0% 2%

Have closed and re-opened multiple

times since the start of the

pandemic

14% 16% 11%

Have been closed completely since

the start of the pandemic5% 2% 7%

Have stayed open (in some way –

takeout only, etc.) since the start of

the pandemic

56% 57% 56%

PEPSICO FOODSERVICE INSIGHTS 22

But Foodservice Operators remain concerned

As COVID cases begin to rise again, and some cities and states

start to reinstate dining restrictions, operators are more worried

compared to last month. Though worries are increasing, most

operators remain fairly confident or cautiously optimistic that

they will be able to survive this crisis.

Those operators that are most nervous are in segments that are

being hit the hardest by COVID, including B&I and lodging. 40

60

80

20

16

20

17

20

18

20

19

20

20

Restaurants Beyond Restaurants

FUTURE EXPECTATIONS INDEX

*100 = Ideal business conditions. Operator expectations reflect anticipated future business conditions in 6

months.

Operator worries about surviving this crisis are increasing

slightly

Operator sentiment on operating conditions saw

some recovery in the latter part of 2020

Source: Datassential COVID-19 Report 44 ‘A Long Winter’ 1/15/21; Technomic Financial Executive Briefing Dec 2020

*Foodservice Operators are surveyed to gauge their sentiment and

expectations regarding current and expected business health

conditions across a variety of factors which are aggregated to

create the Index seen above.

15% are feeling very nervous that their operation will not be able to come back to business

55% are worried, but fairly confident their operation can get through this in one piece

30% are feeling cautiously optimistic and expecting to emerge stronger than ever

+2% since Nov 16

-5% since Nov 16

+4% since Nov 16

PEPSICO FOODSERVICE INSIGHTS 23

Operators are looking to suppliers for support

OPPORTUNITIES

Many operators are emotionally and

financially stressed as they are trying to

figure out how to drive sales in a COVID

environment

Customer needs are changing, and many

are trying to brainstorm ways to meet these

needs

KEY CONSIDERATIONS

EASE STRESS this could be through extending expiration

dates, rebates, marketing support, insights into how to drive

beverage sales, creating ways to offer fountain beverages in

a contactless and safe environment

UNDERSTAND that many customers have shifted to off-

premise, and offer packaging, promotions, marketing that

speaks to this change

• If sales have severely decreased, operators are looking for help and

devising ways to drive business

• Operators are grateful for support that eases operations in any way

possible from both their suppliers and corporate HQ’s (if franchised)

OBSERVATIONS

Source: PepsiCo Foodservice IPSOS Qualitative Dec 2020

PEPSICO FOODSERVICE INSIGHTS 24

Consumers also show concerns but are less nervous than before

VERY SAFE

53%

67%

41%

26%

6%

6%

Mar 25 2020

Jan 25 2021

NERVOUS AT RISK

Mar 25 Jan 25

it’s already that safe today 10% 27%

1 to 2 weeks 9% 5%

1 month 18% 7%

2 to 3 months 29% 11%

4 to 6 months 15% 15%

longer than 6 months 10% 24%

it’ll never be as safe as

before9% 11%

Source: Datassential Coronavirus Traffic Brief 1/25/21; CRC Real Time Consumer Dining Out Survey 12/18/20

Unease has started to subside among consumers getting

food from a restaurant

While some consumers feel dine-in is safe today,

others feel it may take 4-6 months or more

When do you feel it will be safe again to dine at

a restaurant?

Consumer expectations for dining out in the next six

months swing positive –as net 9% of consumers think

they will eat out at restaurants more frequently than

they are today

PEPSICO FOODSERVICE INSIGHTS 25

January saw rebounds in dine-in occasions, guest sentiment strong

Source: Cleveland Research Company US Seated Diners (OpenTable) Feb 2020; NRN.com (Black Box Intelligence) ; Suzy

Instagram

‘@warmspotsny’

features ratings for

both level of warmth

and vibe

3 in 10 Consumers intend on dining out

at a restaurant for Valentine’s

Day (17% outdoors, 15% indoors)

OpenTable Reservations indicate an increase after a dip in December

U.S. restaurant “diners” for the month of January was down 57% y-y

compared to December at -62%, November at -52%, October at -40%

The slowdown in November and December was likely due to rising COVID

cases and increased state/local restrictions, plus lack of outdoor dining in

the winter months. The January data also highlights the impact of

states/cities starting to loosen restrictions on restaurants

Despite the decrease in traffic in December 2020,

Guest Sentiment Increased

Ambiance/cleanliness and Service

specifically showed improvements year-over-year

Consumers are staying engaged & sharing

great local outdoor winter dining spots on

social media

Instagram

‘@covid.date.spots’

has details on outdoor

covering type,

heating, &

reservations

PEPSICO FOODSERVICE INSIGHTS 26

Who’s Winning?

Restaurants that were well positioned in drive-thru or digital/delivery had better performance vs. competition

Fourteen QSR operators increased traffic vs. the prior yearThroughout the pandemic there were two subchannels that consumers turned to

more than others - QSR Chicken and QSR Pizza/Italian

QSR PIZZA QSR CHICKEN QSR BURGER/SANDWICH

Source: The NPD Group/CREST® JAS‘20

Three FSR chains grew share of traffic in the latter part of 2020, due in part to increased deal activity

PEPSICO FOODSERVICE INSIGHTS 27

Consumers plan on utilizing Independent restaurants more this year

• Consumers say they are visiting Independents more than Chains, but Chains are still a bigger piece of the pie

• Restaurant traffic to Independents has increased over the COVID timeframe (Dec vs. Mar), overcoming impacts of closures and perceptions of safety

• Consumers (net) are planning on utilizing both Chain and Independent restaurants more in 2021, though they intend on increasing their utilization more at Independent restaurants vs. Chains (25%, 21% respectively)

• Consumers most often say supporting local businesses as the reason for planning to increase purchases there

• Better Food Quality is the #1 reason for Chain visits and #2 for Independents

Source: CRC Away from Home Path to Purchase Nov 2020; Mintel The Future of Foodservice:2021 Dec 2020; Datassential Coronavirus Traffic Brief 1/25/21

Independents

Share of restaurant traffic

Chains

70%

30%

Jan 2020

31% of consumers SAY they are visiting Independent

Restaurants MORE than Chains;

Agreement increases among higher income consumers

due to the impact of a higher price perception

Visiting Independent Restaurants vs. Chains

PEPSICO FOODSERVICE INSIGHTS 28

Continue to prioritize Off-Premise, as the Homebody

Economy rises

Source: Datassential COVID-19 Report 42 ‘Bracing for More’ 12/24/20; CRC Real Time Consumer Dining Out Survey 12/18/20

Take-Out & Delivery have seen rapid increases in use & adoption in 2020; This

will continue into 2021

Restaurants

91%

60%

72%

50%

61%

10%

1%

Which services are you currently offering to patrons?

74%

58%

45%

40%

39%

6%

5%

Carryout / takeout

Indoor seating

Curbside pick-up

Outdoor seating

Delivery

Drive-thru

Closed

Most Operators are relying on Off-Premise as

additional weather and COVID restrictions

impact business

TOTAL Foodservice

Take-Out & Drive-Thru:

Delivery:

• Delivery usage remains strong - 21% of

consumers say their usage of restaurant

delivery has increased due to the pandemic

• 19% of consumers expect to order delivery

more often over the next 2-3 months

• 13% of consumers noted that their take-

out/drive-thru usage has increased because

of COVID

• Over the next 2-3 months, 22% of

consumers think they will get take-out or

drive-thru from restaurants more frequently

than they are today

PEPSICO FOODSERVICE INSIGHTS 29

More Virtual Restaurants are popping up to fill demand spaces

• Chipotle Digital Kitchen – New prototype allows for location flexibility with its smaller footprint, focusing

pick-up/delivery of digital and catering orders

• Denny’s – Testing two new virtual brands focused on burgers & melts, plans to roll out widely in early 2021

• Wow Bao – Expanding rapidly from its just 12 physical locations, fast-casual Asian chain Wow Bao will add

more than 100 delivery-only locations this year via a partnership with Franklin Junction digital marketplace

• Chicken Wings & Tenders – Brinker’s It’s Just Wings, Applebee’s Neighborhood Wings, Bloomin’ Brands

Tender Shack, SPB Hospitality’s Twisted Tenders, Smokey Bones’ The Wing Experience, Lazy Dog’s Jolene’s

Wings & Beer, Michael Mina’s Tokyo Hot Chicken

CHIPOTLE DENNY’S WOW BAO APPLEBEE’S

Even more new Pick-up/Delivery-Only and Virtual Restaurants from both chains and independents are being created

to develop brands in new markets, often highlighting popular comfort foods like chicken wings/tenders & burgers, etc.

Source: Chipotle News Release 11/11/20; NRN.com; QSRMagazine.com; FSRMagazine.com – Image Credits: Chipotle, The Melt Down, Wow Bao, GrubHub

PEPSICO FOODSERVICE INSIGHTS 30

Operators must innovate to boost lowered beverage consumption

To fit with current operational needs, beverage innovation must also consider ease

of execution, utilizing existing or minimal new ingredients for simplicity

30

Innovation is a key tactic to entice consumers to purchase instead of turning to the fridge, such as:

Specialty drinks, combos/bundles, specials, and family-size beverages

Source: Technomic Beverage Consumer Trend Report Nov 2020; PepsiCo Digital Traffic Drivers Study Jan 2020; Various Sources

Consumers

purchased 3.3

beverages on

average per

week in 2020,

down from 3.8

in 2018

“Beverage sales are phenomenal and

95% of what we sell are combos.

Now that we have such a variety of

beverages, people always buy one.”

- National QSR Chain Operator

New Taco Bell Midnight Berry Freeze – Launching early 2021

Dunkin Super Charged Coffee – 20% more caffeine

Starbucks – Honey Almondmilk Cold Brew – Expanded non-dairy

Applebee’s $5 “Snowy Sips” Margaritas – Monthly value offer

Marketplace examples:

New offerings signal trends at national chains

31

Signals

New

Items

• Chipotle & Freebirds introduced

Cauliflower Rice as a base option

• Pizza Hut debuted 2 pizzas with

Beyond Meat sausage crumbles

• KFC is rolling out a new, premium

chicken sandwich

• McDonald’s is adding 3 new chicken

sandwiches in Feb

• Shake Shack introduced its Korean-

inspired chicken sandwich

• Restaurants pivoted to many

alternative revenue streams

during COVID, including selling

homemade pantry items and

sweet goods

• This will persist in 2021 to

generate incremental revenue

and positive brand extensions to

existing businesses

• Printed Menus gave way to QR

Code menus as a contactless

solution in pandemic times

• Advantages of lowered printing

costs, ability to quickly change

menus, more accurate orders,

speed in payment will drive

continued usage in the future

• Subway has new Protein Bowls

• Fazoli’s permanently added low-

carb flatbread and gluten-friendly

pasta to the menu

• El Pollo Loco added Pollo Fit Bowls

with a protein focus

• Consumers embraced outdoor

dining as a safer alternative to

dine-in in the latter part of 2020

• Depending on municipal

regulations, these new patios on

sidewalks, parking spaces and

other places may become a

fixture for comfort and pleasure

MORE CHICKEN SANDWICHES PLANT BASED KETO, LOW-CARB, HIGH PROTEIN

QR CODE MENUS RESTAURANT BRANDED FOOD OUTDOOR DINING SPACES

• Chick-fil-a

introduced Grilled

Spicy Chicken Deluxe

Sandwich as an LTO

• Dunkin’ offered a

LTO Southwest

Veggie Power

Breakfast Sandwich

with a black bean

patty

PEPSICO FOODSERVICE INSIGHTS 32

DINE IMPLICATIONS

DINE

1. Continue strong execution & communication of safety measures to reassure consumers that are still nervous about restaurants

2. Especially in Independent Restaurants, evaluate any guest pain points and remove barriers to visitation as much as possible to capitalize on positive consumer sentiment

3. Optimize off-premise services to build loyalty with consumers that will endure into the New Normal

4. If operators have not done so already, begin re-filling the innovation pipeline with thoughtful items, balancing persistent constraints and guest desire for novelty

PepsiCo Foodservice InsightsWe are in a time of unprecedented change and disruption as a result of the COVID-19 pandemic. While

there are more questions than answers right now, we are committed to delivering best-in-class insights

and perspectives that will provide a more informed approach as we jointly build plans that can succeed

on the other side of this challenge.

Due to the dynamic nature of the situation, this document will evolve as new information refines our

hypotheses.